Monthly foreign capital inflows into Asian stock markets hit a 15-month high!

As the US-China trade tensions eased in May, Asian stock markets attracted significant inflows of foreign capital during the month.

According to LSEG data, foreign investors collectively purchased approximately $10.65 billion worth of stocks in Asia in May, marking the largest monthly net purchase since February 2024.

The data showed that stock markets in India, South Korea, Indonesia, Vietnam, the Philippines, and Taiwan, China, all recorded capital inflows. Among them, Taiwan, China's stock market saw an inflow of $7.28 billion in overseas funds in May, setting a record for the largest monthly net purchase since November 2023. India recorded an inflow of $2.34 billion, marking the largest monthly net purchase since September 2024.

In addition, stock markets in South Korea, Indonesia, and the Philippines also experienced net inflows of foreign capital, amounting to $885 million, $338 million, and $290 million, respectively, while the Thai stock market faced a net sell-off of $491 million.

Optimistic Outlook

Wall Street giant Goldman Sachs stated that it has raised its earnings growth forecast for the MSCI Asia Pacific (ex-Japan) index to 9% for both 2025 and 2026, citing stronger macroeconomic growth in China and the US, which is driving growth in the Asia-Pacific region.

On the other hand, global investors' hesitation towards US assets is also a factor contributing to the rise in Asian markets. Due to the US government's unresolved debt issues, many investors previously sought safer havens in Europe. However, data shows that Italy, France, and the UK are also facing debt challenges, making the Asian market relatively more attractive.

This also means that Asian countries have greater policy space to implement more fiscal stimulus measures to boost consumption and financial markets. In addition, the rapid growth of emerging tech companies in Asia also provides investment options for investors seeking high growth.

Low valuations are also a major driving factor. As of May 23, the 12-month forward price-to-earnings (P/E) ratio of the STOXX50, a major European stock index, was 15.4 times, significantly lower than the 21.0 times of the S&P 500 index. The P/E ratio of the MSCI Asia (ex-Japan) index, a major emerging Asian stock index, was even lower, at just 13.4 times.

However, Invesco warned that in H2 2025, Asian markets will continue to be affected by macroeconomic risks, which may outweigh the positive impact of domestic drivers in the short term. Nevertheless, another positive factor is the continued weakness of the US dollar. The appreciation of Asian currencies will continue to attract foreign capital inflows and support domestic consumption.